$1200 shaping up as a key inflection point, page-4

Diggers and Drillers
Friday, 9th of July 2010 4.59pm
Melbourne, Australia
By Dr Alex Cowie

Monetisation of gold at the highest level


The gold price has found support around the US$1,200 level this week, although a few weeks of bullishness in the stock market might well see the gold price pull back further. It is still strongly in uptrend as I mentioned last week, and I would say that any buying opportunities will be short-lived.

The Bank for International Settlements (BIS), often called 'the central bank to central banks', announced something very interesting about the use of gold by European commercial banks this week. In the year to 31 March 2010, the banks used 346 tonnes of gold, worth US$13 billion at current prices, as collateral to secure loans from the BIS.

This is effectively monetisation of gold at the highest level of financial governance. BIS have done a little bit of this in the past, but not for a long time and not at this magnitude. It highlights how gold is slowly but firmly starting to function as a currency.